2008 (11) TMI 579 - AT - Central Excise

Cenvat/Modvat - Inputs utilization of inputs for export goods - Credit taken inputs received by appellant however due to business exigencies removed to 100% EOU/Manufacturer-exporter under CT-3 certificate and ultimately used by recipient for goods exported

Summary

Issues:
Refund claim rejection based on input credit reversal for materials sent to EOU/Exporter.

Analysis:
The appeal challenged the rejection of a refund claim amounting to Rs. 9,41,297/- by the Commissioner of Central Excise (Appeals-I), Bangalore. The core issue revolved around the appellant receiving inputs for which credit was taken, subsequently sending some input material to a 100% EOU/manufacturer exporter under CT-3 Certificate/Annexure-I due to business exigencies. The materials sent were used by the recipients for manufacturing final products exported. The revenue authorities contended that the appellant should reverse the input credit as the inputs were not used by the appellant themselves for final product manufacture. The appellant's refund claim was rejected by the lower authority and upheld by the Commissioner (A) based on the argument that the appellant was not the manufacturer of the materials sent to the 100% EOU/Exporter.

The learned departmental representative referred to Notification No. 22/2003 and Notification No. 43/2001. Notification No. 22/2003 pertained to exemption for goods brought to EOU/STP/EHTP units, specifying that excisable goods must be directly procured from the factory of the manufacturer or warehouse by the user industry. The revenue's stance was that the material removed by the appellant did not fall under this Notification since the appellant was not the manufacturer. Notification No. 43/2001, issued under Rule 19(3) of the Central Excise Rules, outlined the procedure for user industries to procure goods used in manufacturing final products for export.

The judgment highlighted Rule 19(2) of the Central Excise Rules, stating that any material could be removed without duty payment from a factory, warehouse, or other premises for use in manufacturing goods for export, as approved by the Commissioner. The judge noted that the appellant had followed the procedure outlined in Notification No. 43/2001 and had removed goods based on CT-3 Certificate. It was emphasized that Rule 19(2) did not mandate goods to go only from the manufacturer to the EOU/Exporter, allowing for materials procured by the appellant to be sent to EOU/Exporter. Consequently, the judge deemed the revenue's advice for input credit reversal as incorrect and ruled in favor of the appellant's entitlement to the refund of the credit reversed, ultimately allowing the appeal with consequential relief.